Wednesday, August 30, 2000 Oil prices slump as OPEC, importers wrangle

OIL prices slipped a little from near 10-year highs amidst discord between Organisation of Petroleum Exporting countries' (OPEC) exporters enjoying big revenues and importers hit by mounting fuel costs.

Brent blend crude ended 39 cents easier at $30.30 a barrel while U.S. light crude finished down 52 cents at $31.70.

An OPEC official said the Saudi-dominated exporter cartel would act if prices stayed at current levels, but he added the group saw no shortage of crude on international markets.

"We don't see a real shortage of crude. We think that the fundamentals of the market are okay," Shokri Ghanem, acting secretary-general of the organisation, told an industry conference in Vienna.

"If this price level continues, then of course OPEC has to do something," he added, referring to a rally that has drawn expressions of concern from the United States and the European Union.

Prices have risen by 15 per cent this month alone, at one point hitting their highest for a decade, powered by fears of a shortage of U.S. heating oil in the northern hemisphere winter.

Heating oil prices are at their highest since the 1991 Gulf War, with U.S inventories of the petroleum product down more than 39 per cent nationwide for the year.

In Europe, dealers said heavy German buying to replenish inventories has taken the premium for heating oil over crude to the highest level in four years.

Extra OPEC oil had been expected to start replenishing shrunken stockpiles in the West but data this week showed inventories still in decline.

Ghanem added that OPEC did not want to disrupt the world's economy but he believed the recent run-up was due to speculation, and said OPEC could not react simply on fluctuations in industry stocks.

President Bill Clinton told reporters on Wednesday he would be happier with prices in the range between $20-$25, and said OPEC would suffer if costly crude caused recession among consuming nations.

"The current level of oil prices will prove harmful to the global economy in due course and thus threaten the goose that lays OPEC's golden eggs," said London think-tank, the Centre for Global Energy Studies.

But in a mounting stand-off, leading U.S. supplier, Venezuela, said consumer governments were to blame for high prices through market speculation, high taxes and costly environmental rules.

A price mechanism informally agreed by OPEC in June calls for a 500,000 bpd increase if the price of an OPEC basket of seven crudes stays above a $22 - $28 band for 20 working days. So far, it has been above the range continuously since August 14.

But OPEC, which controls the bulk of internationally traded supplies, is unlikely to take action on the current price spike ahead of its next policy meeting on September 10.

Besides kingpin member, Saudi Arabia, which has kept quiet so far, other members are seen to have little significant spare capacity to raise output.

Indonesian new Oil Minister, Purnomo Yusgiantoro, said on Thursday that his country was having trouble meeting its given production quota. Indonesia is OPEC's only Asian member.

http://www.ngrguardiannews.com/energy/eg796203.html

-- Martin Thompson (mthom1927@aol.com), August 30, 2000